Tag Archives: Big Brother

Spy on Your Customers … or Else

Do you distrust the banking system? Prefer to do business in cash? Complain about the encroachment of Big Brother into every facet of your life?

If you answered “yes” to any of these questions, you’d better watch out. You’re a “person of interest” – and a growing number of businesses must report your “suspicious activities” to the feds. If they don’t, they can be fined and the responsible parties even imprisoned.

These requirements originated in a law called the “Bank Secrecy Act” (BSA). Of course, this Orwellian law has nothing at all to do with protecting bank secrecy. Indeed, the BSA has all but eliminated confidentiality.

Regulations issued under the BSA require financial institutions to notify the Financial Crimes Enforcement Network (FinCEN), a Treasury Department bureau, of any unusual transactions in which their customers engage. Reporting is mandatory for transactions that exceed $10,000 and are not the sort in which the particular customer would normally be expected to engage. For money transmitter businesses, a $2,000 threshold applies.

The businesses covered by these requirements must file “suspicious activities reports” (SARs) secretly, without your knowledge or consent. FinCEN makes the reports available electronically to every US Attorney’s office and to dozens of law enforcement agencies. No court order, warrant, subpoena, or even written request is needed to access a report.

Buying cashier’s checks, money orders, or travelers’ checks for less than the reporting limit ($10,000 for a cash transaction);

Making deposits in cash, then having the money wired somewhere else; and

Withdrawing cash without counting the cash first.

Now, FinCEN has issued preliminary regulations that could extend these rules to investment managers. All SEC-registered investment advisers would be required to design and implement an anti-money-laundering program. They would also need to file SARs with FinCEN.

Once these rules come into effect, investment advisors would no longer be accountable to you, their client. Their highest duty, reinforced by civil and criminal sanctions, would be to act as unpaid undercover agents for the US Treasury.

But FinCEN’s suspicious transaction reporting rules are just the tip of the iceberg. For instance, official guidance from the FBI and other government agencies indicate that all of the following actions make you a terror suspect:

[B]eing a citizen is sufficient cause to suspect a person of criminal conduct, thereby constricting civil liberties protections for that person. That situation is hard to distinguish from the legal status of citizens of Nazi Germany.

In a world that views virtually everything you do as suspicious, there aren’t a lot of options to protect yourself. Indeed, simply by expressing your interest in privacy, asset protection, precious metals, or any of the other topics I cover routinely, you’re likely on one government watch list or another already.

However, you can take steps to avoid having a bank or other financial institution – including an investment manager – file an SAR on you. If you’re considering doing anything out of the ordinary in your account, talk to an officer at the bank, brokerage, or other financial institution first. For instance, you might want to let someone know before you pay off a loan or make or receive a large transfer.

If you have a reasonable explanation for the transaction, it’s much less likely to set off an alarm. And in a country in which all citizens are considered criminal suspects, that’s definitely something you want to avoid.